Draw graphs for both a pure monopolist who sets output where MR=MC and for a monopolist who is able to
perfectly price discriminate. You may, for the sake of simplicity, assume that MC is constant (flat) in both
cases. Label the deadweight losses (if any) for both graphs, and answer the following questions:
a) Which is more efficient, in the economic sense?
b) Which is better for consumers?
c) Which results in higher monopoly profits?
d) Normative question – is price discrimination a bad thing?
Sample Solution